A big part of this firm’s appeal is its huge array of products and its wide geographic reach, which cuts its exposure to any one customer or market.
The company is also spending more on research and development, which should ultimately spur its earnings and keep rewarding investors with dividend hikes and share repurchases.
The stock trades at 17.7 times the company’s 2021 earnings forecast.
3M COMPANY (New York symbol MMM; www.3m.com) makes over 60,000 consumer and industrial goods, including Post-It notes, Scotch tape, Scotch-Brite cleaning products, Scotchguard fabric protection and Thinsulate insulation.
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The company’s sales tend to fluctuate with the overall economy. They rose 8.5% from $30.11 billion in 2016 to $32.77 billion in 2018. Sales then declined 1.9% to $32.14 billion in 2019 before rebounding slightly to $32.18 billion in 2020.
Earnings fell 3.8%, from $5.05 billion in 2016 to $4.86 billion in 2017. 3M is an aggressive buyer of its own shares. As a result, its per-share earnings declined 2.8%, from $8.16 to $7.93. Earnings then rebounded to $8.89 a share (or $5.35 billion) in 2018 before falling to $7.81 a share (or $4.57 billion) in 2019. A gain on the sale of a business pushed up 3M’s earnings to $9.25 a share (or $5.38 billion) in 2020. If you factor out all unusual items, it earned $8.74 a share in 2020.
The COVID-19 pandemic continues to spur strong demand for 3M’s safety equipment, including N95 respirator masks (they block 95% of very small particles, including those containing the virus).
In the second quarter of 2021, 3M’s sales jumped 24.7%, to $8.95 billion from $7.18 billion a year earlier. Overall earnings also improved 16.7%, to $1.52 billion from $1.31 billion. Per-share earnings rose 15.1%, to $2.59 from $2.25, due to more shares outstanding.
The company ended the quarter with cash of $5.5 billion, or $8.86 a share. Its long-term debt of $16.3 billion is a reasonable 16% of its market cap.
3M aims to spur its long-term growth by launching new products, particularly in industries with strong growth prospects, such as electric vehicles and indoor air quality systems. In the latest quarter, it spent $514 million (or 5.7% of its sales) on research. That’s up 21.2% from $424 million (5.9% of sales) a year earlier.
The company faces several lawsuits over its use of polyfluoroalkyl substances (PFAS); it stopped using those chemicals in 2002. 3M and two other firms have now agreed to pay a total of $62.25 million to settle claims related to the contamination of drinking water in Hoosick Falls, New York, with PFAS. The company has not yet disclosed its share of this settlement, but it had previously set aside funds for this lawsuit so it won’t impact future earnings.
With the March 2021 payment, 3M raised your quarterly dividend by 0.7%. Investors now receive $1.48 a share instead of $1.47. The new annual rate of $5.92 yields 3.3%. The company has paid dividends continuously for over 100 years and has increased that rate each year for the past 63 years.
3M now expects that rising prices for raw materials such as plastic resin and wood pulp, as well as higher labour costs will slow its profit growth in the second half of 2021.
An ongoing shortage of computer chips, which is forcing automakers to cut their production, will also hurt earnings at 3M’s automotive business.
However, these are short-term setbacks that should ease over the next few months. As well, 3M is raising its selling prices, which will protect its margins.
The company will probably earn $10.08 a share in 2021, and the stock trades at a reasonable 17.7 times that forecast.
3M’s annual dividend has risen an average 5.9% in the past 5 years. Its TSI Dividend Sustainability Rating is Above Average.
Thanks for posting a comment. A big part of this firm’s appeal is its huge array of products and its wide geographic reach, which cuts its exposure to any one customer or market.The company is also spending more on research and development, which should ultimately spur its earnings and keep rewarding investors with dividend hikes and share repurchases.
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3m stock price has done nothing in 5 years.
Thanks for posting a comment. A big part of this firm’s appeal is its huge array of products and its wide geographic reach, which cuts its exposure to any one customer or market.The company is also spending more on research and development, which should ultimately spur its earnings and keep rewarding investors with dividend hikes and share repurchases.